'No fireworks' at NAFTA talks, but few signs of progress

MEXICO CITY (Reuters) - Negotiations in Mexico to update NAFTA have not made much progress on tough U.S. demands that could sink the 1994 trade pact, but the current round of talks are progressing with civility, some participants said on Saturday.

A NAFTA logo is seen during the fifth round of NAFTA talks involving the United States, Mexico and Canada, in Mexico City, Mexico, November 18, 2017. REUTERS/Edgard Garrido

Officials from the United States, Canada and Mexico are meeting in Mexico City for the fifth of seven planned rounds to update the North American Free Trade Agreement, from which U.S. President Donald Trump has threatened to withdraw.

Time is running short to seal a deal by the deadline of end-March 2018. Officials say next year’s Mexican presidential election means talks after that date will not be possible.

The U.S. administration has made demands that the other members say are unacceptable, such as a five-year “sunset” clause and tightening so-called rules of origin to boost the North American content of autos.

“It is very slow moving but there are no fireworks,” said a Canadian source with knowledge of the talks, adding there had “not been much conversation at all” on the more contentious U.S. proposals.

Within hours of the latest round of talks formally starting on Friday, Canada was complaining about inflexibility by the United States.

Officials have so far discussed other issues such as labour, gender, intellectual property, energy and telecommunications but it is too soon to say whether there will be any breakthroughs this round, added a source familiar with the talks.

“The work is moving forward,” Mexican deputy economy minister Juan Carlos Baker told reporters, adding that the three countries had prioritised technical work in Mexico City.

But he said negotiators were aware that much work lay ahead and “we have to double our efforts.”

A NAFTA banner is seen during the fifth round of NAFTA talks involving the United States, Mexico and Canada, in Mexico City, Mexico, November 18, 2017. REUTERS/Edgard Garrido

“The atmosphere is good, the atmosphere is one of work,” Baker added.

The mood was calmer than the tense scenes during last month’s round in Arlington, Virginia, where tough U.S. demands were revealed. Still, the negotiations have passed the halfway point of an initial schedule with few clear signs of process.

Mexican officials hope chapters on telecommunications and e-commerce will be concluded by the end of business on Tuesday, but there has been no indication of this yet.

Although negotiators are scheduled to discuss rules of origin every day, the source said detailed talks on boosting North American content would not be held before the end of the round on Tuesday.

Canada and Mexico say the new rules of origin are unworkable and would damage the highly-integrated auto industry.

“I hope the United States understands there are things ... that Mexico won’t accept, and (I hope) the negotiating process becomes more rational,” Moises Kalach, head of the international negotiating arm of Mexico’s CCE business lobby, told Reuters.

On Friday, the U.S. Trade Representative’s office revised its official objectives to conform to its current demands.

The move prompted U.S. Senator Ron Wyden, the top Democrat on the Senate Finance Committee, to remove a “hold” he had put in place to block confirmation of two Trump administration nominees for deputy USTR positions, a Wyden aide said.

Wyden had complained the trade office was keeping members of Congress “in the dark”.